Microeconomics final
The assumptions of perfect competition imply that: A) individuals in the market determine the market price. B) firms in the market accept the market price as given. C) there will be no new competition due to natural monopolies. D) the price will be decreasing yearly.
B
When economic profits in an industry are zero: A) firms are really doing badly. B) firms are doing as well as they could do in other markets. C) firms should exit so they can make an economic profit in some other market. D) the industry is not in long-run equilibrium.
B
A perfectly competitive industry is said to be efficient because the: A) marginal cost of production of the last unit of output is minimized in the long run. B) product is standardized across firms in the industry. C) average total cost of production of the industry's output is minimized in the long run. D) market price of the good is equal to economic profit for all firms in the industry.
C
In contrast with perfect competition, a monopolist: A) produces more at a lower price. B) produces where MR > MC, and a perfectly competitively firm produces where P = MC. C) may have economic profits in the long run. D) earns zero economic profits in the long run.
C
Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect price to _____, output to _____, consumer surplus to _____, producer surplus to _____, and deadweight loss to _____. A) rise; fall; rise; rise; fall B) rise; fall; fall; fall; rise C) rise; fall; fall; rise; rise D) fall; rise; rise; fall; fall
C
A competitive firm operating in the short run is maximizing profits and just breaking even. Its costs include a monthly state license fee of $100 that must be paid for as long as the firm operates. If the license fee is raised to $150, what should the firm do to maximize profits in the short run? A) increase price B) increase output C) reduce output D) not change output
D
If a monopolist is producing a quantity where MC = P, then profit: A) is maximized. B) is maximized only if MR = P. C) can be increased by increasing production. D) can be increased by decreasing production.
D
Price takers are individuals in a market who: A) select a price from a wide range of alternatives. B) select the lowest price available in a competitive market. C) select the average of prices available in a competitive market. D) have no ability to affect the price of a good in a market.
D
The perfectly competitive model does NOT assume: A) a great number of buyers. B) easy entry to and exit from the market. C) a standardized product. D) that firms attempt to maximize their total revenue.
D
Gary's Gas and Frank's Fuel are the only two providers of gasoline in their town. Gary and Frank decide to form a cartel. Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because, regardless of what Frank does, cheating gives me the best payoff." This is an example of: A) a dominant strategy. B) a tit-for-tat strategy. C) an irrational strategy. D) product differentiation.
a
If a monopolist is producing a quantity that generates MC = MR, then profit: A) is maximized. B) is maximized only if MC = P. C) can be increased by increasing production. D) can be increased by decreasing production.
a
Which Herfindahl-Hirschman index is MOST likely to indicate a perfectly competitive market? A) 100 B) 1,800 C) 10,000 D) 100,000
a
Tacit collusion is relatively easy for oligopolists if: A) they are producing many different products. B) there are only a few firms in the industry. C) they are selling their product to only a few large buyers. D) barriers to entry into the industry are low.
b
The strategy that is NOT an example of price discrimination is: A) discounts for senior citizens at the movies. B) discounts for families with young children at motels. C) generally lower prices at Walmart than at Target. D) cheaper air fares if the traveler stays over a Saturday.
c
To practice effective price discrimination, a monopolist must be able to: A) estimate its own production and cost functions. B) avoid charging too low a price. C) prevent the resale of goods among groups of buyers. D) calculate the income level of each buyer in the market.
c
For the monopolistically competitive wild-caught seafood market, the demand curve for any individual firm is _____, and there are _____ producers of seafood. A) downward sloping; few B) upward sloping; many C) vertical; few D) downward sloping; many
d
The owners of the gas stations in a town are trying to set up a cartel that will raise the price of gasoline. Which scenario will INCREASE the chances that the cartel will fail because of cheating by the owners? A) All of the gas stations face the same costs. B) There are only a few gas stations. C) The gas stations are producing as much as they can. D) The gas stations vary in terms of the services that they provide.
d
Because monopoly firms are price setters, they: A) can sell more only by lowering the price. B) sell more at higher prices than at lower prices. C) take the market-determined price as given and sell all they can at that price. D) charge the highest possible price.
A
If a monopoly has a linear demand curve and is producing at the profit-maximizing level of output, at that level of output, demand is: A) price-elastic. B) price-inelastic. C) perfectly price-inelastic. D) price unit-elastic.
A
In the long run, each firm in a perfectly competitive industry will: A) earn only enough to cover the opportunity costs of all resources used in production. B) produce where MR is greater than MC. C) differentiate its goods. D) increase its price.
A
If large fixed costs result in ATC falling as output increases and this occurs over the relevant range of output, this industry is a: A) constant-cost industry. B) natural monopoly. C) network externality. D) profit maximizer.
B
One government policy for dealing with natural monopoly is to: A) impose a price floor to eliminate the deadweight loss. B) impose a price ceiling to reduce economic profit. C) break it up into smaller firms. D) impose fines on the monopolist.
B